Correlation Between KL Technology and British American
Can any of the company-specific risk be diversified away by investing in both KL Technology and British American at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KL Technology and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KL Technology and British American Tobacco, you can compare the effects of market volatilities on KL Technology and British American and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KL Technology with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of KL Technology and British American.
Diversification Opportunities for KL Technology and British American
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KLTE and British is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KL Technology and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and KL Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KL Technology are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of KL Technology i.e., KL Technology and British American go up and down completely randomly.
Pair Corralation between KL Technology and British American
Assuming the 90 days trading horizon KL Technology is expected to generate 1.35 times more return on investment than British American. However, KL Technology is 1.35 times more volatile than British American Tobacco. It trades about 0.02 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.05 per unit of risk. If you would invest 5,830 in KL Technology on September 2, 2024 and sell it today you would earn a total of 18.00 from holding KL Technology or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KL Technology vs. British American Tobacco
Performance |
| Timeline |
KL Technology and British American Volatility Contrast
Predicted Return Density |
| Returns |
KL Technology
Pair trading matchups for KL Technology
British American Tobacco
Pair trading matchups for British American
Pair Trading with KL Technology and British American
The main advantage of trading using opposite KL Technology and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KL Technology position performs unexpectedly, British American can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in British American will offset losses from the drop in British American's long position.| KL Technology vs. Awanbiru Technology Bhd | KL Technology vs. Media Prima Bhd | KL Technology vs. Tex Cycle Technology | KL Technology vs. Carlsberg Brewery Malaysia |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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